Australia

• S&P/ASX 200 posts a rare rally, joining an elite list of historical moves.
• Implied volatility has collapsed to multi-year lows despite the surge in price.
• We discuss a defined, cost-efficient structure that allows positioning with asymmetry and edge.

• The Hanwha Group has received approval from the US’ CFIUS to acquire up to a 100% stake in Aussie-based shipbuilding and defense firm Austal Ltd (ASB AU).
• Hanwha currently holds 9.9% and a further 9.9% via a cash settled total return swap. Apparently Hanwha had initially filed with CFIUS to approve a 19.9% stake acquisition.
• Hanwha has also applied to FIRB to lift its position to 19.9%.  It’s unlikely the local regulator would block Hanwha subsequent to CFIUS’ nod. Note: Austal “disputes” CFIUS’ approval.

• Virgin Australia Holdings (VGN AU) is looking to raise A$685m in a secondary offering, valuing the company at A$2.27bn. The stock is expected to start trading on 24 June.
• Bain Capital and management are escrowed on their shares till early 2026. There is no escrow for Qatar Airways, but they have indicated that their shareholding is strategic.
• Virgin Australia Holdings (VGN AU) could be added to the S&P/ASX 300 Index in September and there could be global index inclusions in November and December.

• There is 1 change for the S&P/ASX20 Index, 1 change for the S&P/ASX50 Index, 2 changes for the S&P/ASX100 Index and 2 changes for the S&P/ASX 200 (AS51 INDEX).
• There is between A$30m-A$135m to trade in the index changes and that is between 0.7-16 days of ADV in the stocks. Short interest has jumped in a few stocks.
• We expect positioning to be lower than the passive trading in Nick Scali, Viva Energy Group, Perseus Mining, Austal Ltd and Healius.

• As reported by Brian Freitas on 6 June the list of changes to the S&P/ASX family of indices was announced, including some change for the S&P/ASX 200 (AS51 INDEX).
• The S&P/ASX 200 index has become quite overbought as of last Friday’s Close, a pullback is probably imminent.
• This insight evaluates possible scenarios for the possible 2-4 weeks, beyond the June 20 date when the index review will become effective.

Electro Optic Systems (EOS) is a specialist defence business focused on remote weapons systems (RWS) and counter drone systems. The group is set to benefit from increased defence spend globally along with the rapid emergence of drone warfare and the subsequent requirement for asset protection systems. A strong balance sheet and restructured cost base provide a solid platform through which these opportunities can be leveraged.

Electro Optic Systems (EOS) is a specialist defence business focused on remote weapons systems (RWS) and counter drone systems. The group is set to benefit from increased defence spend globally along with the rapid emergence of drone warfare and the subsequent requirement for asset protection systems. A strong balance sheet and restructured cost base provide a solid platform through which these opportunities can be leveraged.

DUG Technology (DUG) provides seismic data processing services and software primarily to the oil and gas industry. As a small but innovative player in the field, the recent launch of elastic multi-parameter full waveform inversion (MP-FWI) technology gives the company the opportunity to gain market share despite the uncertain industry outlook. The recent Q325 update confirmed that order intake has returned to growth, supporting our forecasts for a recovery in revenue and profitability from FY26. In our view, this is not factored into the current share price. Uptake of solutions for immersion cooling and mobile high-performance computing (HPC) could provide further upside to our forecasts and valuation.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Mayne Pharma (MYX AU), Insignia Financial (IFL AU), Fuji Corp (7605 JP), ENN Energy (2688 HK), Smartpay Holdings (SPY NZ), Seven & I Holdings (3382 JP).
• Lowest spreads: Bright Smart Securities And (1428 HK), Toyota Industries (6201 JP), Dada Nexus (DADA US), Avjennings Ltd (AVJ AU), Nissin Corp (9066 JP), Torii Pharmaceutical (4551 JP).

• The ADDs/DELs for the ASX index family for the June 2025 index rebal event were announced after market close on Friday 6th June 2025.
• There are 12 index changes collectively for ASX 20, ASX 50, ASX 100, and ASX 200.
• In this insight, we take a look at our final flow expectations for each of these confirmed index changes.

• I tally 44 – mostly firm, mostly Asia-Pac – arb transactions currently being discussed and analysed on Smartkarma.
• Two new deal were discussed on Smartkarma this week: the Washington H. Soul Pattinson  (SOL AU) / Brickworks Ltd (BKW AU)merger; and Great Eastern Holdings (GE SP)‘s Exit Offer. 
• Key updates/news took place on: Spartan Resources (SPR AU), PointsBet Holdings (PBH AU), ESR Group (1821 HK), and Tam Jai International (2217 HK).

• BGH Capital and Garry Weiss hold an 11% stake in WJL, acquired at A$0.80/share, and submitted a rejected offer at the same price.
• Helloworld increased its stake in WJL to 15%, purchasing shares at A$0.85 and A$0.89/share, and proposed a merger.
• WJL suspended its share buyback program amid takeover interest, and instructed advisors to explore alternative buyers.

• China’s NBS manufacturing PMI edged up to 49.5 in May, while Caixin PMI dropped sharply to 48.3 signaling the first contraction in 8 months. 
• China’s industrial profits stagnated in April 2025, highlighting persistent challenges from weak demand, trade war tensions, and deflationary pressures.
• Iron ore inventories continued to decline amid slowing shipments and softer blast furnace demand, signaling ongoing destocking.  

• Iron ore supply remains steady despite falling Australian exports and surging Brazilian shipments. However, weak Chinese property demand continues to cloud the market outlook.
• Analysts at Singapore Ferrous Week trimmed 2025 iron ore surplus forecasts to 20–30 million tons, citing resilient demand, rising steel exports, and Australian supply disruptions.
• Prices remain below key moving averages, signalling downside momentum, while the MACD staying under its signal line reinforces the ongoing bearish outlook.

• On the 2 June, Washington H. Soul Pattinson and Co. Ltd (SOL AU) (Soul Patts) and Brickworks Ltd (BKW AU), announced that, via inter-conditional Schemes, they would collapse their circularity. 
• A new ASX-listed company (TopCo) would acquire all of the shares in Soul Patts and Brickworks, via the issuance of TopCo shares; 1:1 for Sout Patts, and 0.82:1 for Brickworks. 
• Given the cross-holding,  an interesting exercise is understanding the underlying values for both Soul Patts and Brickworks.

• Mayne Pharma’s acquisition by Cosette Pharmaceuticals faces challenges due to claims of material adverse changes, including financial performance and litigation issues.
• Australian activist fund Harvest Lane Asset Management is building a position in MYX, arguing Cosette lacks grounds to terminate the deal.
• Recent developments include FDA issue resolution, countersuit against TherapeuticsMD, and potential for a modest price cut agreement.

• Horizon Minerals Limited (ASX:HRZ) is an emerging junior gold producer with 1.8moz of gold resources located around the Kalgoorlie and Coolgardie regions of Western Australia.
• HRZ is currently engaged in two mining campaigns which will be toll treated or sold under ore sale and toll agreements with three mill operators in and around Kalgoorlie and Coolgardie.
• In the current gold price environment, we expect these mining campaigns to generate significant cash flows in FY26 which can support HRZ’s longer-term goal of becoming a standalone gold producer.

• On the 2 June, Washington H. Soul Pattinson and Co. Ltd (SOL AU) (Soul Patts) and Brickworks Ltd (BKW AU), announced that, via inter-conditional Schemes, they would collapse their circularity. 
• A new ASX-listed company (TopCo) would acquire all of the shares in Soul Patts and Brickworks, via the issuance of TopCo shares; 1:1 for Sout Patts, and 0.82:1 for Brickworks. 
• Given the cross-holding,  an interesting exercise is understanding the underlying values for both Soul Patts and Brickworks.

• Mayne Pharma’s acquisition by Cosette Pharmaceuticals faces challenges due to claims of material adverse changes, including financial performance and litigation issues.
• Australian activist fund Harvest Lane Asset Management is building a position in MYX, arguing Cosette lacks grounds to terminate the deal.
• Recent developments include FDA issue resolution, countersuit against TherapeuticsMD, and potential for a modest price cut agreement.

• Horizon Minerals Limited (ASX:HRZ) is an emerging junior gold producer with 1.8moz of gold resources located around the Kalgoorlie and Coolgardie regions of Western Australia.
• HRZ is currently engaged in two mining campaigns which will be toll treated or sold under ore sale and toll agreements with three mill operators in and around Kalgoorlie and Coolgardie.
• In the current gold price environment, we expect these mining campaigns to generate significant cash flows in FY26 which can support HRZ’s longer-term goal of becoming a standalone gold producer.

• Mayne Pharma (MYX AU) disclosed that Cosette served a scheme termination notice. Mayne maintains that a material adverse clause was not breached and considers the termination notice invalid.
• The Cosette MAC breach claims likely hinge on establishing that forecasts provided during due diligence are materially lower than the unaudited management accounts. Precedents do not favour Mayne. 
• While the last close price (A$4.48) is below the undisturbed price (HK$5.41), there remains downside. My estimated deal break valuation range is A$3.26-A$4.00.

• Bain Capital is looking to raise around US$440m via selling some of its stake in Virgin Australia Holdings (VAH AU).
• Virgin Australia is the second largest airline group operating in the Australian aviation market, with an average 32% domestic RPT capacity market share in CY24.
• In this note, we look at the company’s past performance and provide our thoughts on valuations.

• The Spartan Resources (SPR AU) IE considers Ramelius Resources (RMS AU)’s offer (A$0.25 cash per share + 0.6957 RMS shares per SPR share) fair and reasonable.
• The offer is conditional on SPR shareholder approval. The vote remains low-risk and is aided by irrevocables (16.87% of outstanding shares). 
• This is a done deal. At the last close and for a 31 July payment, the gross/annualised spread is 0.8%/5.0%.  

• On the 17th March, Spartan (SPR AU) agreed to merge with Ramelius (RMS AU). The cash/scrip merger combined operations around the Mount Magnet and Dalgaranga region in Western Australia.
• The implied price of A$1.78/share was a 27.5% premium to 30-day VWAP.  The deal arrived after Spartan was outbid for Karora (KRR CN), and Spartan rebuffed Westgold (WGX AU)‘s approach.
• The Scheme Booklet is now out, with a Scheme Meeting on the 11th July, and expected implementation on or before the 31st July. The IE (BDO) says “fair & reasonable“.

• PointsBet Holdings (PBH AU) has disclosed a revised Mixi Inc (2121 JP) offer at A$1.20, a 13.2% premium to the previous A$1.06 offer and a 10.6% premium to last close. 
• Due to Betr’s 19.9% stake, which can effectively block Mixi’s scheme, Mixi will consider an off-market takeover offer of A$1.20 with a 50.1% minimum acceptance condition. 
• Mixi’s revised offer is superior to Betr’s if synergies are not factored in. While the Betr’s all-cash offer is equivalent to Mixi’s, it is subject to scale-back.

• With the review period complete, we forecast no inclusions to the index in June. There could be up to 3 deletions at the review though.
• Even if there are no constituent changes, capping changes will lead to one-way turnover of 3.9% and a round-trip trade of A$216m.
• Pilbara Minerals is a potential deletion from the S&P/ASX 50 Index with implementation on the same date. Shorts have been covering but short interest is a big percentage of float.

• Back on the 26th Feb, PointsBet (PBH AU), an Australian/Canadian online wagering platform, entered into a Scheme Implementation Deed with MIXI (2121 JP), at $1.06/share, a 27.7% premium to undisturbed.
• An approach from BETR Entertainment (BBT AU), PointsBet’s key rival, was initially rebuffed. On the 12th May, both parties subsequently entered into mutual due diligence after Betr finagled terms.
• MIXI has now bumped terms to A$1.20/share. The Scheme Meeting has been delayed to the 25th June. DD continues to be carried out by PointsBet and Betr.   

AFT Pharmaceuticals reported FY25 revenues of N Z$208m, posting a strong recovery in H2, with dissipating headwinds and traditional H2 seasonality offsetting the softer H1 performance. H225 revenues (N Z$121.3m) grew 40% over H125 and 9% y-o-y, driven by sustained domestic market momentum and international market recovery. The FY25 operating margin of 8.5% (12.4% in FY24) was affected by lower licensing income and investments in marketing, R&D and international expansion, but these investments should deliver upside opportunities in the longer term. The balance sheet remains strong (net debt reduced to N Z$14.5m, 0.7x EBITDA), supporting the announcement of a 1.8c per share dividend (c 17% payout ratio). Management aims to achieve N Z$300m in revenues by end-FY27 and has guided for operating profit of N Z$20–24m in FY26, with increased operating leverage in the medium term. We update our valuation for AFT to N Z$691.4m or N Z$6.59/share, from N Z$697.4m or N Z$6.65/share previously.

• Lithium price recovery is a matter of when, not if. Lithium prices that peaked in 2022 at ~$80/kg on heavy inventory build, driven by supply chain concerns, and subsequently collapsed to $8-10/kg, due to oversupply and the slower uptake of EVs in the US and Europe, could begin to recover, perhaps as early as next year.
• This takes into account that 40% of the industry is operating at a loss in the current price environment and demand for the metal remains robust, with energy storage markets growing 65% Y/Y and EVs growing 29% Y/Y in 1Q25.
• China’s role in mining and dominance in processing.